Tasmanian doctors have cautiously welcomed the State Government's decision to use the planned Mental Health Observation Unit at the Royal Hobart Hospital for general patients, but questions remain about how the hospital will accommodate acute mental health patients currently waiting for beds.

Ten beds were lost from the psychiatric ward as part of the ongoing redevelopment of the Royal Hobart Hospital, creating a "bed block", where hospitals get choked with patients they do not have the beds to admit and ambulance get stuck waiting with the patients at emergency.

"These are the people we wanted to help and that was the reason for the proposal to open more mental health beds and I think it's a matter of record that hasn't been supported by a number of organisations," said the Health Minister Michael Ferguson.

The President of the Australian Medical Association, Dr Stuart Day, stood by his decision not support the opening of the Mental Health Observation Unit because he said it was not safe and did not cater for acute mental health patients.

"We were concerned because … the placement in the basement of the hospital in a environment that wasn't suitable for treating mental health patients wasn't in their best interests," Dr Day said.

But he admitted there was little space elsewhere in the hospital for psychiatric patients.

"Our organisation … is keen to work with the executive team at the Royal Hobart Hospital to look at other alternative options within the site and very close to the site that could relieve some of the pressure on beds," he said.

Dr Frank Nicklason from the Royal Hobart Hospital's Staff Association said it was another problem to be solved.

But he said the Health Minister needed to learn lessons from the experience of the Mental Health Observation Unit.

"We have psychiatrists who are very experienced and know what's possible, work with those people don't make the same mistake again of having the centralised bureaucracy attempting to solve a local problem," he said.